Author: Youn-Sang Choi

Publisher:

Published: 1998

Total Pages: 268

ISBN-13:

This paper evaluates the economic feasibility and economy-wide impacts of the U.S. ethanol production from lignocellulosic feedstocks (LCF) using Tennessee Valley Authority's (TVA's) dilute acid hydrolysis process. A nonlinear mathematical programming model of a single ethanol producer, whose objective is profit maximization, is developed. Because of differences in their chemical composition and production process, lignocellulosic feedstocks are divided into two groups: Biomass feedstocks, which refer to crop residues, energy crops and woody biomass, and municipal solid waste (MSW). Biomass feedstocks are more productive and less costly in producing ethanol and co-products, while MSW generates an additional income to the producer from a tipping fee and recycling. The analysis suggests that, regardless of types of feedstocks used, TVA's conversion process can enhance the economic viability of ethanol production as long as furfural is produced from the hemicellulose fraction of feedstocks as a co-product. The high price of furfural makes it a major factor in determining the economic feasibility of ethanol production. Along with evaluating economic feasibility of LCF-to-ethanol production, the optimal size of a plant producing ethanol using TVA's conversion process is estimated. The larger plant would have the advantage of economies of scale, but also have a disadvantage of increased collection and transportation costs for bulky biomass from more distant locations. We assume that the plant is located in the state of Missouri and utilizes only feedstocks produced in the state. The results indicate that the size of a plant using Biomass feedstocks is much bigger than one using MSW. The difference of plant sizes results from plant location and feedstock availability. One interesting finding is that energy crops are not feasible feedstocks for LCF-to-ethanol production due to their high price. Next, a static CGE model is developed to estimate the U.S. economy-wide impacts of the current ethanol production with a government subsidy and the LCF-to-ethanol production using TVA's dilute acid hydrolysis process. The model is innovative in three ways. First, a production subsidy is explicitly included in the model. Second, co-products are explicitly accounted for in ethanol production. Third, ethanol and gasoline are treated as perfect demand substitutes, as are the co-products and the manufacturing sector's output. The CGE model shows that current ethanol production expands grain crop production by creating an additional demand. In contrast, LCF-to-ethanol production has adverse impacts on grain crop production because Biomass feedstocks substitute for grain in the production of ethanol. The LCF-to-ethanol production also discourages the manufacturing industry because co-products displace a part of intermediate input demand for manufacturing outputs. It is also found that, even though ethanol production using TVA's conversion technology with MSW is economically viable, it is not favorable to the economy. Finally, the results suggest that ethanol production from Biomass feedstocks using TVA's dilute acid hydrolysis process is beneficial to the U.S. economy.